Regional Markets: Focus on Central Europe

Following the impact of the recession, the concerns over Greece and the Euro, and of course gasworld’s upcoming conference in Ukraine, the spotlight is very much on Europe right now.

Our focus this month is also on Europe, as our regional markets view moves from West Europe and gradually sweeps East. Next month we explore gases in the Commonwealth of Independent States (CIS), but for now we’re evaluating the Central European region.

This is a collective of countries that’s open to individual interpretation, but for the purpose of this analysis we’re considering the gas revenues of countries which include the Czech Republic, Hungary, Croatia, Romania and Poland for example.

When dissecting the CIS gas market next month we’ll look closer at Russia, Ukraine (a participating non-member of the CIS) and other CIS areas such as Kazakhstan.

Let’s get back to Central/Eastern Europe though. After all, this is a market worth just over $2.3bn in 2008 – and that’s without considering the neighbouring CIS countries.Out in front as the region’s largest industrial gas market is Poland, valued at just over $600m in 2008 and exhibiting growth of 29% in that year (gas revenues, 2007; $468m).

Market developmentSuch a healthy growth rate wasn’t just limited to Poland in 2008, as most of the countries within Central Europe showed double-digit growth in gas revenues.

These might be seen as the real heartbeat of the Central/Eastern Europe industrial gas business, comprising just over $1.9bn of the region’s revenues altogether.

By far the largest would be Poland, at more than $600m in 2008 (2008 GDP of $288bn) and accounting for 26% of the Central Europe market. Next up is the Czech Republic, at $547m and clearly ahead of third-placed Hungary – $358m in gas revenues and 2008 GDP of $83bn.

Romania, the subject of our latest Gasman memoirs, is a gases market valued at $188m and moving forward very strongly; so strongly that Messer Romania is confident in the prospects ahead. In a mini interview with gasworld magazine in December 2009, the company acknowledged the effects of recession on the country’s gas business, but also enthused considerable confidence in the market’s future.

Messer Romania Gaz was established in 1998 and since then, Messer has set-up a further two companies in the country, Messer Magnicom Gaz and Messer Energo Gaz, with the group of companies head office located in Bucharest.

Paula Mocanu, responsible for communications at Messer Romania’s Bucharest headquarters, spoke on behalf of the Managing Director and said, “Generally, the steel industry in Romania has reduced orders, but in some cases new technologies are implemented to increase the efficiency, which results in higher specific gas consumption.”

“The most developed industries in Romania,” Mocanu added, “are metallurgy, metal manufacturing, automotive, refining, and the coal industry on the one hand, and the food and furniture industries on the other.”

Creeping up close on the shoulder of Romania is Slovakia, an industrial gas business that grew 22% in 2008 to record gas revenues of $133m and a Central Europe market share of about 6%.

Yet the highest proliferation seen in 2008 was from Bulgaria – perhaps not the first country to spring to mind when thinking of industrial gases, but exhibiting 35% growth over 2007 and with revenues edging ever nearer that $100m mark ($83m).

And we haven’t even discussed the Balkans yet! This cluster of countries chalks up revenues of around $330m altogether and when consolidated comprises of around 14% of the Central Europe market. Slovenia ($98m gas revenues) and Croatia ($93m) are the top two performers in the Balkans countries, showing 2008 growth of 18% and 20% respectively.

News, views & analysisAccording to our figures courtesy of Spiritus Consulting, The Linde Group leads the way in what we define here as Central Europe, operating with up to a 43% share of the market. Compared to its fellow Tier 1 players, such a strong market share gives Linde a considerable foothold in the region’s gas business.

Above Praxair (4%), Air Liquide (7%) and Air Products (15%) is independent German gases company Messer Group, accounting for around 20% of the Central Europe market, or approx. $475m in gas revenues.

As well as continuing to expand in Western Europe, Messer places substantial value on the gases business of Central/Eastern Europe and by the close of 2010, will have invested significantly in new plants in the region.

Ernst Bode, Senior Vice-President of South Eastern Europe for the Messer Group, discussed the company’s presence in the region. He exclusively told gasworld, “Messer has been active in South Eastern Europe for more than 20 years now. The markets of the region are by now established and relatively stable. Messer now enjoys, due to its early commitment to the region, a fairly important share.”

“Despite the relatively low prices of industrial and medical gases compared to the Central and Western European markets, we are able to deliver a satisfying profitability due to lower costs and a healthy market presence and the resulting cost-effective logistical structures.”

Discussing Messer’s hopes for the region in the future, Bode added confidently, “For the future we plan to proportionally participate in the market growth and to further strengthen our presence in the eastern and southeastern countries of the region.”

Dirk Fünfhausen, Senior Vice-President for Central Europe said, “The region is one of the fastest growing regions in Europe within the Messer Group, with annual growth rates more than 8% p.a. in the past. On top of that, EBITDA contribution was about 25% of the group’s EBITDA in 2008. At present, Messer also feels the influence of the worldwide economic crisis, but in the medium-long term we are still confident of a quick recovery and coming back to growth rates better than those of Western Europe.”

Also confident in the area is Air Products, keen to build on its 15% market share and as recently as October 2008 announcing the construction of a new cylinder filling depot in Poland and completion of its high purity hydrogen plant in Novaky, Slovakia.

Air Products is regarded as the largest supplier of technical & industrial gases in Poland and is further strengthening this position of leadership with the new state-of-the-art cylinder filling depot in Warsaw – originally scheduled for completion this year. Set to be operational later in 2010, the depot will use the latest technology to fill over 3,000 cylinders per day at a pressure of 200 bar, equipped to fill cylinders with all types of medical gases, technical gases and its Linux® range of welding gases.

It will become the second such facility built by Air Products in Poland, following the opening of its depot in Kędzierzyn-Koźle in 2005.

As an example of an equipment company confident in the prospects of Central & Eastern Europe, cryogenic pump manufacturer ACD CRYO is enthusiastic about the opportunities for growth in the region.

In spring 2009, ACD CRYO General Manager Patrick Ravinel told gasworld how Central & Eastern Europe, led by Poland, the Czech Republic and Hungary, is definitely one of the regions the company is interested in.

He explained, “We are present in Eastern Europe with the major industrial gas companies, and we are looking to further develop business with smaller companies also.”

He added, “There are a lot of development possibilities in Eastern Europe, because the industries want to modernise. They need to bring some industries up to the standards of Western Europe, and this is why we think there are a lot of opportunities.”

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